Switzerland and Germany have initialled a tax deal which will give Swiss securities funds the same access to the market as Ucits vehicles. Germany’s regulator BaFin has approved the agreement.

Germany and Switzerland have agreed a tax deal that will give Swiss securities funds access to the lucrative European Union market.

Under the deal initialled by Switzerland's Federal Council, provisions have been granted market access to the German market for Swiss securities funds (SSFs).

The Federal Financial Supervisory Authority (BaFin), the German regulator, has agreed to treat SSFs as if they were Ucits funds.

The Swiss Funds Association (SFA) welcomed the deal. "The SFA is pleased that its efforts with regard to market access have resulted in such a major success," said Martin Thommen, SFA president, adding, "we will continue to support our authorities in this regard, both within Europe and beyond, and we hope that this agreement will send out a signal."

SFA CEO Matthäus Den Otter is confident the tax agreement will help boost Swiss fund sales in the German market. "Currently there are 156 SSFs," said Den Otter, "We hope this category will become more attractive as soon as it qualifies for equal treatment with Ucits in Germany."

Although SSFs comply with the EU Ucits directives, Swiss funds of hedge funds (FoHFs) and other vehicles that do not meet Ucits terms are not covered by the agreement. Swiss funds falling under the EU's alternative investment fund managers (AIFM) directive will continue to face barriers to marketing and distribution in member states.

The technical details of a mutual recognition deal have not yet been resolved between BaFin and the Swiss Financial Market Supervisory Authority (Finma).

The new rule will enter into force after ratification by both German and Swiss parliaments in 2013.

AIMA Launches Smaller Managers’ Group

Alternative Investment Management Association, a hedge fund industry trade association, has decided to extend membership to smaller hedge fund managers. AIMA is launching a Smaller Managers' Group. The group includes European hedge fund managers with US$250 million or less under management.

The Alternative Investment Management Association, a hedge fund lobby group with 1,250 corporate members, has created a sub-group for its European members with US$250 million or less under management.

AIMA says the Smaller Managers' Group is expected to meet on a regular basis to discuss “issues of common concern” including regulations, sound practices, due diligence, interactions with service providers and business pressures.

The group held its first meeting earlier this month during which it appointed Jim Kandunias, principal of Esemplia Emerging Markets, as chair.

Andrew Baker, AIMA CEO, said: “It is well documented that smaller managers in general have faced considerable challenges since the financial crisis. But smaller managers are an important source of innovation and fresh ideas. Even today’s giants of the industry started out small. Source

Institutional investment to hedge funds slated to rise by $195 billion in 2012, according to Preqin

Hedge funds will receive significant inflows over the next 12 months, particularly from funds of hedge funds (FoHFs) such as Permal and private and public pension funds, says a survey.

Almost a third (32%) of 2,700 investors surveyed by research company Preqin plan to allocate additional capital to hedge funds before July next year.

This could bring a net inflow of $195 billion into hedge funds, significantly boosting the assets under management (AUM) of the global hedge fund industry, currently estimated at $2 trillion.

According to Preqin, FoHFs are driving this surge in hedge fund investment. Established FoHFs are developing new strategies to attract capital. Over half (54%) of FoHFs surveyed by Preqin said they expect to make new hedge fund investments.

Permal, a FoHF with $23 billion AUM, could be adding as many as 25 new managers to its portfolios by 2012, the report said.

Other key sources of hedge fund investment include sovereign wealth funds (SWFs). Around 39% of the SWFs surveyed plan to make new hedge fund investments while public sector pension funds (36%) and private sector pension funds (24%) are also expected to increase allocations to the industry.

Allocations by pension funds to hedge funds have risen from 3.6% in 2007 to 6.6% of total investments, according to the report.

Well over half (67%) of private sector pension funds are accessing hedge funds through FoHFs with 57% of public sector pension funds using the same route.

Family offices, the early investors into hedge funds, now have the least interest in these investments, with just 17% saying they will make new allocations over the next 12 months, stated the report.

The majority of investors increasing allocations to hedge funds are based in the US (51%), followed by Europe (39%) and Asia (3%).

The vast majority of investors surveyed (87%) said they were considering equity long/short strategies. An example of this is Clariden Leu, a Zurich-based FoHF, which is seeking equity long/short managers as part of its plans to allocate $30 million to 10 managers by next year.

Macro hedge funds were the second most popular with 64% of investors considering this strategy.

However, managers of unique or uncommon strategies are also gaining in favour with 58% of investors claiming they operate an open door policy with such funds and consider all strategies on an opportunistic basis.

Under half (47%) of the investors surveyed, particularly those new to hedge fund investment, said they wanted to access these alternatives via FoHFs.

This contradicts a Citi Prime finance report published earlier in July showing institutional allocations to FoHFs have fallen from 45% to just 33%. Direct investments into hedge funds currently account for 66% of institutional investment compared with 55% in 2006, Citi's report said.